BE CAREFUL

Be careful what you get use to. Probably no place is that more important than it is with today's stock market.

The trend may be your friend and all that, but complacency often comes with a high price tag. The S&P 500 is up 5.4% so far this year closing at 1502.96 last week, not far from its all-time high of 1565.19 in 2007. Annualized that would produce a market gain over 60%. Ain't going to happen.

Sell in May and go away is a shopworn Wall Street slogan. Could we see a summer sell-off to rival the Summer 2011 one when all the political nonsense about budget deficits and ceiling cliffs is over come June?

Another well-worn Wall Street ditty says markets always climb worry-walls. Maybe so but this market is acting like it doesn't have a single global care, climate change and genetically modified grains notwithstanding. Yet there remains enough possibly serious problems in the wind that could sideswipe the entire dog and pony act.

Start with sequestration. Set to take place in March if Congress can't agree to disagree to agree that many believe will whack about 1% off the hide of GDP and push unemployment higher. One government agency expected to get whacked pretty hard is DoD, the Department of Defense, where an estimated 118,000 jobs will disappear faster than my old girlfriend's affections.

Sequestration is, in case you haven't heard, a politically-contrived term to describe mandated budget cuts to reduce the deficit set to kick in if Congress can't agree to disagree to agree before summer rolls around.

Stimulus packages, like many things in life, arrive in various forms: tax cuts, easier credit, ramped up spending, lower interest rates, to say the least. According to one report, in the last year and a half globally there have been over 300 stimulus packages from various governments. Forget the Yellow Brick Road, follow the stimulus package because there is most likely a stock market profit in there somewhere.

One such package is the Federal Reserve's love affair with the bond market (Yea, we know folks have been talking about this for some time.) that many seem to believe can continue forever. But if the minutes of the last FOMC meeting earlier this month are any indication, forever might not linger more than, give or take, a few bond auctions away. In short, there appears to be some conflict in Federal Reserve Land. Not everyone wants to continue riding the same attraction.

Say it anyway you want, frontwards or backwards or whatever, it means higher interest rates. And don't be too surprised if those higher rates are already in the economic porridge.